Buy Ambuja Cements; target of Rs 700: Motilal Oswal

Motilal Oswal's research report on Ambuja Cements

We attended the plant visit event organized by ACEM at its Marwar Mundwa plant in Rajasthan, where we interacted with the senior management team, followed by a tour of the plant. Key highlights of the interaction are as follows: 1) the company’s market share increased from 11-12% to 14.5%, with a target of ~17-18%/+20% by FY28E/FY30E; 2) increasing its premium cement share remains a key focus area, which is currently accounts for ~24% of its trade volume, with ~INR400/t higher profitability; 3) capacity expansion is on track and company is confident of achieving targeted capacity of 140mtpa by FY28; and 4) it has reiterated its EBITDA/t target of INR1,500/t by FY28E, led by cost savings and an increasing share of premium cement.

Outlook

We estimate the company’s consolidated revenue/EBITDA/PAT CAGR at ~17%/35%/36% over FY25-27, albeit on a low base. We estimate EBITDA/t to increase to INR960/INR1090 in FY26/FY27 vs. INR768 in FY25. ACEM (consol.) trades at 21x/17x FY26E/FY27E EV/EBITDA and USD154/USD147 EV/t. We reiterate our BUY rating with a TP of INR700 (valuing the stock at 20x FY27E EV/EBITDA).